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Intermediate · Self-paced2026 Edition

DCF Valuation: From Forecast to Defensible Number

Build a discounted cash flow valuation that survives a stranger's review. The core mechanics: forecasting free cash flow, working out a defensible WACC, the terminal value question (and why it usually drives the answer), sensitivity tables, and the sanity checks that separate a real DCF from a number you wrote down.

12

Modules

~10h 15m

Reading time

Intermediate

Level

Self-paced

Format

§

Syllabus

  1. 01

    Why DCF — and when not to use it

    The core idea: a business is worth the present value of the cash it will throw off. When that frame works (mature, predictable cash generators) and when it doesn't (early-stage, deep-cycle, distressed).

    ~35 minModule 01
    →
  2. 02

    Free cash flow — what to actually discount

    FCFF vs FCFE, the bridge from EBIT to free cash flow, why net income is the wrong number, and the working-capital and capex adjustments that bite.

    ~50 minModule 02
    →
  3. 03

    Forecasting revenue

    Top-down vs bottom-up, unit economics, the 5-year explicit period, S-curves, and why every revenue forecast eventually converges to GDP-plus.

    ~50 minModule 03
    →
  4. 04

    Forecasting margins and the cost structure

    Gross margin, operating margin, the levers that move them, why 'margin expansion' should be defended not assumed, and the operating-leverage trap.

    ~45 minModule 04
    →
  5. 05

    Working capital, capex, and the cash drain you forgot

    DSO, DPO, DIO, the cash conversion cycle as a forecast input, maintenance capex vs growth capex, and why depreciation is not a usable proxy for either.

    ~50 minModule 05
    →
  6. 06

    The terminal value — where DCFs are won or lost

    Gordon growth vs exit multiple, the implied growth that makes them consistent, why TV is usually 65-85% of enterprise value, and the discipline of bounding it.

    ~60 minModule 06
    →
  7. 07

    WACC — building a discount rate you can defend

    Cost of equity (CAPM, beta, equity risk premium), cost of debt (yield to maturity, not coupon), the after-tax adjustment, and the capital-structure weights you actually use.

    ~55 minModule 07
    →
  8. 08

    Cost of equity in detail — CAPM and beyond

    Levered vs unlevered beta, regression betas vs comparable betas, the equity risk premium debate, country risk premiums, and the size premium argument.

    ~50 minModule 08
    →
  9. 09

    Sensitivity, scenarios, and Monte Carlo

    The two-variable sensitivity table that should be on every DCF, scenario weights, and when a Monte Carlo helps versus when it just adds spurious precision.

    ~45 minModule 09
    →
  10. 10

    Sanity checks that catch the bad DCF

    Implied EV/EBITDA, implied EV/sales, implied perpetual growth in the TV, comp-set checks, and the cross-check against precedent transactions.

    ~45 minModule 10
    →
  11. 11

    Twelve common mistakes

    Discounting nominal cash flows with a real discount rate. Mid-year vs end-of-year. Stub periods. Wrong tax rate. Equity vs enterprise. The dozen errors that catch most analysts at least once.

    ~40 minModule 11
    →
  12. 12

    A real DCF, line by line

    Build a complete DCF for a public company end to end: forecast, terminal value, WACC, sensitivity, sanity checks, and the verbal defence of the answer.

    ~90 minModule 12
    →

How to use this course

Start with module 01 if the material is new; skip ahead if you have prior exposure. Each module is self-contained but the arc is sequential — the projects in the final module assume the toolkit from modules 1-11. Every module ends with key takeaways and a curated further-reading list with primary sources.